Lululemon (LULU) Stock Slides After 2Q Earnings Release

Shares of Lululemon Athletica Inc. (LULU) were trading down -6.42 or -8.37 percent to $70.24 per share in Friday’s premarket trading. The company released slightly lower than expected revenue for its second quarter earnings yesterday after the market close. Lululemon Athletica closed at $76.66 per share, up +0.15 or +0.20 percent in Thursday’s regular trading session.

Stock Analysis

Vancouver, British Colombia based Lululemon Athletica Inc. was founded in 1998 by Chip Wilson.
The company describes itself as a yoga inspired athletic clothing and apparel company. Lululemon produces a unique clothing line and distributes its products through an international retail chain of stores which operate in the United States, Canada, Australia and New Zealand. Chip Wilson stepped down from the company’s chief executive position in 2005 and resigned from the company’s board in February of 2015. Wilson resigned as the boards chairman in December of 2013 after the company had to recall 17 percent of the chain’s yoga pants because their sheerness made them turn out to be see-through.

For Lululemon’s fiscal second quarter ended on July 31st, the company reported diluted earnings per share of $0.39 versus $0.34 in the same quarter one year ago.
Lululemon (LULU) Stock Slides After 2Q Earnings Release
Image by HannahWells / Pixabay
On an adjusted basis, diluted earnings per share came to $0.38. Net revenue for the quarter was $514.5 million compared to $453.0 million in the second quarter of 2015, an increase of +14 percent, or +15 percent on a constant currency basis.

Lululemon reported comparable store sales in the quarter had increased +3 percent, or +4 percent on a constant currency basis, while direct to consumer net revenue increased +6 percent to $874 million or +7 percent on a constant currency basis. With the exclusion of an online warehouse sale, direct to consumer revenue would have increased by +16 percent.

Gross profit came to +$254.2 million, an increase of +20 percent from last year with 49.4 percent as a percentage of net revenue, which compares to 46.8 percent in 2015’s second quarter. Income from operations came to $74.0 million, up from $66.6 million last year, an increase of +11 percent.

In the company’s press release, Lululemon Chief Executive Officer Laurent Potdevin stated that, “The second quarter demonstrated strong results as we delivered sales and EPS at the high-end of our guidance and saw an important inflection in our gross margin and earnings performance. Our progress in the second quarter, especially in gross margin and inventory, marks the beginning of our recovery in profitability and sustainable long term growth.”

For the third quarter, Lululemon expects net revenue to be in the range of $535 million to $545 million. The estimate is based on total comparable store sales in the mid single digits on a constant currency basis. Diluted earnings per share are forecast to be $0.42 to $0.44 in the third quarter.

For the full 2016 year, Lululemon now expects revenue to be in the range of $2.325 billion to $2.350 billion based on comparable store sales in the mid single digits on a constant currency basis. Diluted earnings per share are expected to be between $2.11 and $2.19 for the full year or $2.07 to $2.15 adjusted for tax and related interest items incurred in the first two quarters.

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Published on Sep 2, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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